Response to the following problem:
On January 1 of this year, Barnett Corporation sold bonds with a face value of $500,000 and a coupon rate of 7%. The bonds mature in 10 years and pay interest annually on December 31. Barnett uses the the effective interest amortization method. Ignore any tax effects. Each case is independent of the other cases.
Complete the following table. The interest rates provided are the annual market rate of interest on the date the bonds were issued.
Case A (7%) Case B (8%) Case C (6%)
(a) Cash received at issuance
(b) interest expense recorded in year 1
(c) cash paid for interest in year 1
(d) cash paid at maturity for bond principal